Pre-Trade Checklist
The questions you meant to ask before clicking buy, asked while you are still calm. Build your own list, tick it before every entry, and get a clear signal only when all of it passes.
By Joey van Diest, founder and editor Updated
Your checklist
Why a checklist and not just discipline
The case for checklists does not rest on the idea that traders are careless. It rests on the opposite: that experienced people under time pressure skip steps precisely because those steps are familiar. Aviation and surgery adopted them for that reason, and the measured reductions in error were large. Trading has the same structure, a repeated procedure carried out under time pressure with real consequences, which is why the transfer is plausible even though no study proves a checklist makes anyone profitable.
What it does is prevent a very costly type of mistake. That is entering without a defined stop. Making an assumption as to size based on how obvious the entry looks. Taking a trade which you have never intended to take. Adding to a losing position. Immediately trading into another position right after a loss; at this time you are most likely trying to get your money back, and therefore are in the least amount of control. All of these types of mistakes are not due to lack of knowledge, and every trader has knowledge enough to know they should be doing things differently. The reason for all of these errors is they can be caught with a simple written checklist.
Keep it short and make it fail sometimes
A checklist is working when it occasionally stops you. If yours has never once prevented a trade, it is decoration: the items are either too vague to fail or you are ticking them automatically. Vague items are the usual culprit, "the setup looks good" cannot fail, while "price closed above the level on the higher timeframe" can. Prefer items with a factual answer, keep the list under about ten, and delete anything that has never caught you.
The natural companion is the record. When an item does stop you, or when you override it and the trade goes badly, that belongs in the trading journal as a note against the trade, because a pattern of overrides on one setup is a real finding. For the sizing item specifically, the position size calculator turns a stop distance into an actual number, which is what makes "size is correct" a question with a checkable answer rather than a feeling.
Frequently asked questions
- Do checklists actually work?
- Their work has been impressive when it comes to aviation and surgery. In both areas the data suggests that checklists can significantly lower error rates. However, as we know, trading is certainly not surgery. No studies show (in an unbiased manner) that use of a checklist will generate profits. It may be plausible for a checklist to help eliminate some mistakes that occur with regularity and are typically caused by individuals who enter into trades without having a stop-loss, or size positions based on "feel", trade off a strategy they don't even take, or pursue losses. These are the types of errors which can cause good strategies to lose money.
- How many items should it have?
- Few enough that you actually read them. A checklist of twenty items becomes wallpaper within a week and gets ticked reflexively, which is worse than none because it manufactures false confidence. Aviation checklists for critical phases are typically under ten items. Keep the ones that have actually caught you out, and delete anything you have never once failed.
- Where is my checklist stored?
- Only here on this browser; in local storage. It's never sent anywhere, and there is no account being kept. The checklist you've created (and which might be important to you) can be erased from your system with a simple "clear site data". So again, if you've built a checklist you'd like to preserve for future reference, go ahead and save it as a bookmarked URL by using the share link.
- Should the checklist be the same for every setup?
- Risk items are always the same as your trading will use the same methods for sizing, where to place stops and how much you expose your accounts regardless. Context items are different based upon which strategy you are using; most traders have one general list of items and then add some specific items depending upon their particular set-up. Instead of removing an item if you fail it over and over again with one particular strategy, write that down in your journal.
Method and limitations
Your checklist is stored within this browser using local storage. Your checklist is never transmitted to a server or any account. The site data will be cleared, therefore use the share link as an alternative backup, the share link contains all information for the checklist in the url. Evidence exists documented procedural error reduction in aviation and medicine by utilizing checklists; there is no equivalent body of research to support trading returns improved by one and that page does not claim so. It is a discipline aid, not trading advice.
This tool runs entirely in your browser. Nothing you enter is sent to us or stored.
For general information and education only. This is not financial advice and not a recommendation to buy or sell anything. This tool is provided as is, with no warranty of accuracy: like any software it can contain errors, so always verify figures against your broker or the original source before acting on them. Trading and investing carry risk, including the risk of losing more than your initial outlay.
Spotted an error? Email contact@economicium.com and it will be corrected. Maintained by Joey van Diest.